BUZ LIVINGSTON: What to do when the market slides: Don’t panic!

By Buz Livingston | Just Plain Talk

Published: Thursday, June 27, 2013 at 05:12 PM.

After a particularly stinging loss to Georgia Tech on the heels of successive Auburn and Florida defeats, the late, great Lewis Grizzard wrote … nothing. Actually he scripted one sentence but only one and in a feat never seen before or since went to press with a blank column. Blank newsprint is, and always will be, an anathema, but Grizzard’s journalistic moxie could not be denied.

The day after the market shed 350 points, a handful of fisherman had a similar idea taking advantage of a glorious South Walton morning by doing nothing, at least with their portfolio. While I don’t fish, I do monkey-boat and it was a moment the TDC wishes it could bottle.

A line of showers came through late the day before. Instead of typical muggy summer weather following a shower, early morning risers enjoyed low humidity and pleasant temperatures. I needed to scoop up my legally stored (yes Turtle Watchers) kayak from the beach but couldn’t keep it out of the water. Watching the fishermen planted the seed for this column.

This is not a buy, hold and forget column, but rather a don’t panic sell column. Should you buy, sell or hold depends on your goals, time horizon and risk tolerance. A few weeks ago a relative of mine flagged me down electronically and badgered me about the market, “Why did you let it go down? I got out back in 2009 then got back in last year.” Deep sigh, just because you can go online and make the trades yourself doesn’t mean it’s a good idea.

Washington Irving, America’s first great writer, penned a tale featuring a slothful character named Rip Van Winkle. To avoid work and to escape his ever-nagging wife, Rip takes to the hills and stumbles on a gregarious group in the middle of a big party. After several games of nine-pens, multiple rounds of spirituous drink and much conviviality, Rip lays down for what turns out to be a multi-year snooze.

Pretend you are Rip — for me a bit of a reach since my wife never nags — and you take a nap on Dec. 31, 2007, waking up early Friday, June 21, 2013. Trying to catch up on the news you hear all the gloom and doom regarding the market decline.

When our 21st century Rip clicks on his accounts he likely is befuddled since the Dow Jones Industrial Average grew more than 11 percent during his nap coupled with 2-3 percent annual dividend income. When Irving’s Rip woke up, he declared his allegiance to King George III sleeping through the American Revolution while our modern day Rip would have been just as confused with the market decline chatter.

After a particularly stinging loss to Georgia Tech on the heels of successive Auburn and Florida defeats, the late, great Lewis Grizzard wrote … nothing. Actually he scripted one sentence but only one and in a feat never seen before or since went to press with a blank column. Blank newsprint is, and always will be, an anathema, but Grizzard’s journalistic moxie could not be denied.

The day after the market shed 350 points, a handful of fisherman had a similar idea taking advantage of a glorious South Walton morning by doing nothing, at least with their portfolio. While I don’t fish, I do monkey-boat and it was a moment the TDC wishes it could bottle.

A line of showers came through late the day before. Instead of typical muggy summer weather following a shower, early morning risers enjoyed low humidity and pleasant temperatures. I needed to scoop up my legally stored (yes Turtle Watchers) kayak from the beach but couldn’t keep it out of the water. Watching the fishermen planted the seed for this column.

This is not a buy, hold and forget column, but rather a don’t panic sell column. Should you buy, sell or hold depends on your goals, time horizon and risk tolerance. A few weeks ago a relative of mine flagged me down electronically and badgered me about the market, “Why did you let it go down? I got out back in 2009 then got back in last year.” Deep sigh, just because you can go online and make the trades yourself doesn’t mean it’s a good idea.

Washington Irving, America’s first great writer, penned a tale featuring a slothful character named Rip Van Winkle. To avoid work and to escape his ever-nagging wife, Rip takes to the hills and stumbles on a gregarious group in the middle of a big party. After several games of nine-pens, multiple rounds of spirituous drink and much conviviality, Rip lays down for what turns out to be a multi-year snooze.

Pretend you are Rip — for me a bit of a reach since my wife never nags — and you take a nap on Dec. 31, 2007, waking up early Friday, June 21, 2013. Trying to catch up on the news you hear all the gloom and doom regarding the market decline.

When our 21st century Rip clicks on his accounts he likely is befuddled since the Dow Jones Industrial Average grew more than 11 percent during his nap coupled with 2-3 percent annual dividend income. When Irving’s Rip woke up, he declared his allegiance to King George III sleeping through the American Revolution while our modern day Rip would have been just as confused with the market decline chatter.

After the worst market decline in more than 80 years, his portfolio grew. Sometimes nothing is a pretty cool hand.

A 2 percent, one-day decline or advance certainly warrants attention. A sharp decline likely bothered you more than a similar spurt upwards. Relax — it’s human nature. If retirement is 10-plus years away, what do you care? With a closer retirement date or during retirement, consider adjusting your portfolio, especially if your stock allocation has grown. Capital gains spend just like dividend or interest income and can have more generous long-term capital gain tax rates.

Should you sell, maybe, but never panic sell.

Buz Livingston, CFP, has the only investment management firm in the entire world headquartered in Blue Mountain Beach. He helps clients along Florida’s Emerald Coast and around the country with financial decisions. Contact him at 850-267-1068 or www.livingstonfinancial.net. For timely financial tweets follow @BuzLivingston.